When I review my financial statemtents for year end the Cash Flow statement show my inventory as a negative balance for the current month and year end. The Balance Sheet shows the inventory as a positive balance. Is it supposed to be that way?

Remember you are looking at the cash flow statement. The cash flow statement has to be adjusted to show how cash was either generated or used. Since you state there is a negative balance on the cash flow statement, it would indicate that your inventory increased by the amount of the negative balance, that is you used cash to purchase inventory. Subtract your beginning and ending inventory and that should be the change.

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Originally Posted by MLSNC

Subtract your beginning and ending inventory and that should be the change.

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That depends on whether it's direct or indirect. The change in balance is used for indirect, but for direct method, there's other adjustments that must be done in order to arrive at the amount to use, which ill not equal the change in balance.